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Preferred Bank Reports Quarterly Earnings
ソース: Nasdaq GlobeNewswire / 17 10 2023 16:04:20 America/New_York
LOS ANGELES, Oct. 17, 2023 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2023. Preferred Bank (“the Bank”) reported net income of $38.2 million or $2.71 per diluted share for the third quarter of 2023. This represents an increase in net income of $3.0 million or 8.5% over the same quarter last year and up slightly compared to the second quarter of 2023. The primary driver of the increase over the prior year quarter was net interest income which increased by $6.2 million or 9.2% over the same period last year partially offset by higher noninterest expense. When compared to the prior quarter, net interest income was down slightly, as was noninterest income and noninterest expense.
Overall, results were very strong and the Bank also provided for $3.5 million in provision for credit losses which has driven the allowance for credit losses to total loans up to 1.46%.
Highlights for the Quarter:
- Return on average assets was 2.25%
- Return on beginning equity of 22.66%
- Net interest margin was 4.39%
- Total deposits increased $94.3 million or 6.7% annually for the quarter
- Efficiency ratio was 25.0%
- Quarter-end cash and equivalents continues to be strong at $1.02 billion or 18.0% of total deposits
Li Yu, Chairman and CEO, commented, “We are pleased to report another quarter of record profit. Earnings per diluted share for the third quarter was $2.71.
“For the quarter, loans practically stayed even and deposits grew modestly, which is the reflection of the cautiousness of both the Bank and its clients under the current environment. The margin decreased moderately from 4.58% in Q2 to 4.39% for Q3, largely because interest cost increases have slowed down.
“Credit quality remained relatively stable in the quarter. As of September 30, 2023, loans 30-89 days past due were negligible and total criticized loans increased slightly from the previous quarter. For the quarter, we have made a provision for credit losses in the amount of $3.5 million. Allowance for credit losses at September 30, 2023 now increased to 1.46% of total loans. We have been diligently identifying any credit loss exposures and fully reserving any potential exposure so that loan resolutions will not negatively affect the future operating income.
“Our operating expenses remain under control and were within our expectations. The Bank’s efficiency ratio for the quarter was 25.0% Since the second quarter of this year, we have been continuously buying back our own stock due to our strong tangible capital position and the market price of the stock. Through September 30, 2023, total shares repurchased were 730,044. Even with the buyback, our tangible capital equity ratio was a strong 10.1%.
“Based upon public information, Preferred Bank is the most profitable independent Bank in California measured by return on equity metrics and we hope this trend will continue. However, the market price of our stock does not reflect our ability to consistently deliver top-of-peer earnings over many years. We will not be discouraged by the market reception and pledge to continue our devotion to operate the Bank efficiently and prudently.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $73.0 million for the third quarter of 2023. This was a significant increase from the $66.8 million recorded in the same quarter last year but down just slightly from the $73.3 million posted in the second quarter of 2023. The FOMC rate hikes throughout 2022 and into 2023 drove loan portfolio yields higher, as most of the Bank’s loans are tied to the Prime rate. Interest expense increased this quarter slightly more than did interest income as deposit rates continued to climb during most of the quarter. Due mainly to increasing deposit rates, the Bank’s taxable equivalent net interest margin declined by 19 basis points to 4.39% from 4.58% last quarter. Comparing to the same quarter last year, the margin was up by 2 basis points over the 4.37% posted this quarter last year.
Noninterest Income. For the third quarter of 2023, noninterest income was $3.0 million compared with $2.2 million for the same quarter last year and compared to 3.1 million for the second quarter of 2023. The increase compared to the second quarter of 2022 was due to an increase in both service charges on deposits as well as Letter of Credit (“LC”) fee income. The decrease from the second quarter of 2023 was due to lower gain on SBA loan sales as well as lower LC fee income.
Noninterest Expense. Total noninterest expense was $19.0 million for the third quarter of 2023 compared to $20.9 million for the second quarter of 2023 and compared to the $17.4 million recorded in the same period last year. Comparing this quarter to the third quarter of last year, the major variances were; personnel expense increased by $682,000 or 5.5%, other professional services increased by $262,000 due mainly to legal fees and consulting fees and other expense increased by $810,000 due mainly to higher FDIC premiums as well as a one time $150,000 penalty for payroll tax which we believe will be at least partially recovered. In comparing the third quarter of 2023 to the prior quarter; personnel expense increased by $488,000 or 3.9% and there was no OREO valuation adjustment in the current quarter which means that OREO costs decreased by $2.7 million. For the quarter ended September 30, 2023, the Bank’s efficiency ratio was 25.0%, besting the 27.3% posted last quarter and slightly better than the 25.2% posted this quarter last year.
Income Taxes. The Bank recorded a provision for income taxes of $15.2 million for the third quarter of 2023. This represents an effective tax rate (“ETR”) of 28.5% and the same as the 28.5% ETR for the second quarter of 2023 but up from the 28.0% ETR recorded in the third quarter of 2022. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.
Balance Sheet Summary
Total gross loans at September 30, 2023 were $5.13 billion, an increase of $53.4 million from the total of $5.07 billion as of December 31, 2022. Total deposits increased to $5.68 billion from the $5.56 billion as of December 31, 2022, an increase of $126.3 million. Total assets were $6.63 billion, an increase of $207.2 million over the total of $6.43 billion as of December 31, 2022.
Uninsured Deposits
As of September 30, 2023, total uninsured deposits represented approximately 41.8 % of total deposits. Since mid-March, we have been diligently working with our larger deposit clients to enroll them in various reciprocal deposit programs to ensure that all of their deposits are FDIC insured. It should be noted that included in the uninsured deposits figure is $187 million of deposits that are collateralized so these would not otherwise necessitate FDIC insurance. Finally, there are also a number of accounts totalling $166 million that are enrolled in one of our reciprocal deposit programs but have yet to participate in the program; these are also included in uninsured deposits.
Balance Sheet Fair Market Values from June 30, 2023
With so much focus recently on ASC Topic 825, Financial Instruments, formerly known as FASB 107, we felt it would be beneficial for shareholders to view the Bank’s disclosure in its recently filed Quarterly Report on Form 10-Q for June 30, 2023. As can be clearly seen, the rise in interest rates has not hurt the fair market value of our loan portfolio, unlike mst other banks.
June 30, 2023 Fair Value Measurement Using Carrying Amount Estimated Fair Value (Dollars in thousands) Assets: Cash and cash equivalents Level 1 $ 1,049,745 $ 1,049,745 Securities held-to-maturity Level 2 21,818 19,865 Securities available-for-sale Level 2/3 352,548 352,548 Loans receivable, net Level 3 5,036,618 5,102,339 Customers' liability on acceptances Level 2 448 448 Accrued interest receivable Level 2/3 28,184 28,184 Federal Home Loan Bank stock Level 2 15,000 N/A Liabilities: Demand deposits and savings: Noninterest-bearing Level 2 $ 870,282 $ 870,282 Interest-bearing Level 2 2,037,387 2,037,387 Time deposits Level 2 2,681,322 2,665,195 Subordinated debt issuance Level 2 148,114 169,134 Acceptances Outstanding Level 2 448 448 Accrued interest payable Level 2 6,998 6,998 Liquidity
As of September 30, 2023, the Bank had $1.02 billion in cash and fed funds on the balance sheet representing 18.0% of total deposits. In addition, the Bank had $1.11 billion in FHLB borrowing availability, $85.42 million in available funds from the FRB Discount window and $156.2 million in available for sale securities that were unpledged. All summed, this totals $2.39 billion of total liquidity or 42.1% of total deposits.
Asset Quality
As of September 30, 2023, nonaccrual loans increased to $19.4 million, from $423,000 reported as of June 30, 2023 and up from the $6.2 million reported as of September 30, 2022. Although a marked increase, we are confident in the expedient and low cost resolution of these loans. In addition, OREO and repossessed assets totaled $16.7 million as of September 30, 2023. In addition to that, the Bank’s total criticized and classified assets assets remained fairly constant at $115.3 million compared to $105.1 million as of June 30, 2023. Total net charge-offs were $80,000 for the third quarter of 2023 as compared to net charge offs of $0 last quarter and compared to net recoveries of ($2.4 million) in the same quarter last year. Management is acutely aware that commercial real estate is under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, this weakness has yet to appear. We will be vigilant going forward.
Office Building Loans
As a result of the pandemic and working from home, office occupancy has suffered and there has been a corresponding decline in the value of office properties, especially in city centers. As of September 30, 2023, the Bank has the following office loans; (in 000’s)
Medical Office $ 14,184 Mixed Use (Office & Retail) 170,590 Pure Office 177,322 Reposition for Multi-Family 105,731 Total $ 467,827 Substantially all of the office building loans are secured by properties located in more suburban areas. There are only $9.0 million of office building loans in downtown areas.
Allowance for Credit Losses
The provision for credit losses for the third quarter of 2023 was $3.5 million compared to $2.5 million last quarter and compared to $2.7 million in the same quarter last year. Macro economic conditions as well as more stress in the commercial real estate sector lead to the increase in the provision from last quarter. The Bank’s allowance coverage ratio now stands at 1.46% of total loans.
Capitalization
As of September 30, 2023, the Bank’s leverage ratio was 10.46%, the common equity tier 1 capital ratio was 11.63% and the total capital ratio stood at 15.32%. As of December 31, 2022, the Bank’s leverage ratio was 10.30%, the common equity tier 1 ratio was 10.81% and the total risk-based capital ratio was 14.39%.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2023 financial results will be held tomorrow, October 18, 2023 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com.
Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 1, 2023; the passcode is 6410410.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2022 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.
Financial Tables to Follow
PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Interest income: Loans, including fees $ 106,695 $ 102,220 $ 71,192 Investment securities 18,556 15,919 7,111 Fed funds sold 278 272 117 Total interest income 125,529 118,411 78,420 Interest expense: Interest-bearing demand 20,257 16,406 6,436 Savings 67 47 19 Time certificates 29,369 25,436 3,850 FHLB borrowings 1,557 1,888 - Subordinated debt 1,325 1,325 1,325 Total interest expense 52,575 45,102 11,630 Net interest income 72,954 73,309 66,790 Provision for credit losses 3,500 2,500 2,700 Net interest income after provision for credit losses 69,454 70,809 64,090 Noninterest income: Fees & service charges on deposit accounts 939 844 703 Letters of credit fee income 1,412 1,576 956 BOLI income 103 103 100 Net gain on sale of loans 21 186 - Other income 497 392 428 Total noninterest income 2,972 3,101 2,187 Noninterest expense: Salary and employee benefits 13,008 12,520 12,326 Net occupancy expense 1,563 1,476 1,452 Business development and promotion expense 193 200 214 Professional services 1,423 1,343 1,161 Office supplies and equipment expense 395 398 456 Loss on sale of OREO, valuation allowance and related expense 140 2,838 314 Other 2,287 2,077 1,477 Total noninterest expense 19,009 20,852 17,400 Income before provision for income taxes 53,417 53,058 48,877 Income tax expense 15,225 15,122 13,688 Net income $ 38,192 $ 37,936 $ 35,189 Income per share available to common shareholders Basic $ 2.74 $ 2.63 $ 2.44 Diluted $ 2.71 $ 2.61 $ 2.40 Weighted-average common shares outstanding Basic 13,925,994 14,419,959 14,792,298 Diluted 14,105,915 14,560,693 15,006,801 Cash dividends per common share $ 0.55 $ 0.55 $ 0.43
PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Nine Months Ended September 30, September 30, Change 2023 2022 % Interest income: Loans, including fees $ 304,796 $ 181,852 67.6 % Investment securities 47,454 13,969 239.7 % Fed funds sold 774 182 325.5 % Total interest income 353,024 196,003 80.1 % Interest expense: Interest-bearing demand 53,701 10,315 420.6 % Savings 153 58 163.9 % Time certificates 71,399 8,409 749.1 % FHLB borrowings 3,819 - 100.0 % Subordinated debt 3,975 3,975 0.0 % Total interest expense 133,046 22,757 484.6 % Net interest income 219,978 173,246 27.0 % Provision for credit losses 6,500 5,350 21.5 % Net interest income after provision for credit losses 213,478 167,896 27.1 % Noninterest income: Fees & service charges on deposit accounts 2,477 2,097 18.1 % Letters of credit fee income 4,312 3,218 34.0 % BOLI income 307 299 2.7 % Net loss on called and sale of investment securities (4,117 ) - -100.0 % Net gain on sale of loans 547 - 100.0 % Other income 1,481 1,440 2.9 % Total noninterest income 5,007 7,054 -29.0 % Noninterest expense: Salary and employee benefits 39,256 35,654 10.1 % Net occupancy expense 4,513 4,315 4.6 % Business development and promotion expense 498 491 1.4 % Professional services 3,915 3,864 1.3 % Office supplies and equipment expense 1,197 1,404 -14.7 % Loss on sale of OREO, valuation allowance and related expense 3,050 715 326.6 % Other 6,332 4,254 48.9 % Total noninterest expense 58,761 50,697 15.9 % Income before provision for income taxes 159,724 124,253 28.5 % Income tax expense 45,523 34,968 30.2 % Net income $ 114,201 $ 89,285 27.9 % Dividend and earnings allocated to participating securities $ - $ (2 ) 100.0 % Net income available to common shareholders $ 114,201 $ 89,283 27.9 % Income per share available to common shareholders Basic $ 8.01 $ 6.09 31.5 % Diluted $ 7.92 $ 6.00 31.9 % Weighted-average common shares outstanding Basic 14,257,005 14,653,982 -2.7 % Diluted 14,418,939 14,873,933 -3.1 % Dividends per share $ 1.65 $ 1.29 27.9 %
PREFERRED BANK Condensed Consolidated Statements of Financial Condition (unaudited) (in thousands) September 30, December 31, 2023 2022 (Unaudited) (Audited) Assets Cash and due from banks $ 998,508 $ 747,526 Fed funds sold 22,600 20,000 Cash and cash equivalents 1,021,108 767,526 Securities held-to-maturity, at amortized cost 21,474 22,459 Securities available-for-sale, at fair value 335,608 428,295 Loans 5,128,242 5,074,793 Less allowance for credit losses (74,849 ) (68,472 ) Less amortized deferred loan fees, net (10,240 ) (9,939 ) Loans, net 5,043,153 4,996,382 Other real estate owned and repossessed assets 16,716 21,990 Customers' liability on acceptances 103 1,731 Bank furniture and fixtures, net 8,748 8,999 Bank-owned life insurance 10,563 10,357 Accrued interest receivable 33,627 23,593 Investment in affordable housing partnerships 54,679 61,173 Federal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 47,311 43,218 Operating lease right-of-use assets 20,440 21,718 Other assets 4,000 2,917 Total assets $ 6,632,530 $ 6,425,358 Liabilities and Shareholders' Equity Deposits: Noninterest bearing demand deposits $ 838,300 $ 1,192,091 Interest bearing deposits: 2,091,384 2,295,212 Savings 30,427 39,527 Time certificates of $250,000 or more 1,283,461 1,138,727 Other time certificates 1,439,699 891,440 Total deposits 5,683,271 5,556,997 Acceptances outstanding 103 1,731 Subordinated debt issuance, net 148,173 147,995 Commitments to fund investment in affordable housing partnerships 20,824 27,490 Operating lease liabilities 18,438 20,949 Accrued interest payable 12,506 2,608 Other liabilities 78,707 37,162 Total liabilities 5,962,022 5,794,932 Shareholders' equity 670,508 630,426 Total liabilities and shareholders' equity $ 6,632,530 $ 6,425,358 Book value per common share $ 48.75 $ 43.91 Number of common shares outstanding 13,753,246 14,358,145
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Unaudited historical quarterly operations data: Interest income $ 125,529 $ 118,411 $ 109,084 $ 98,379 $ 78,420 Interest expense 52,575 45,102 35,369 24,267 11,630 Interest income before provision for credit losses 72,954 73,309 73,715 74,112 66,790 Provision for credit losses 3,500 2,500 500 2,000 2,700 Noninterest income 2,972 3,101 (1,066 ) 2,808 2,187 Noninterest expense 19,009 20,852 18,899 19,976 17,400 Income tax expense 15,225 15,122 15,176 15,384 13,688 Net income $ 38,192 $ 37,936 $ 38,074 $ 39,560 $ 35,189 Earnings per share Basic $ 2.74 $ 2.63 $ 2.64 $ 2.76 $ 2.44 Diluted $ 2.71 $ 2.61 $ 2.61 $ 2.71 $ 2.40 Ratios for the period: Return on average assets 2.25 % 2.32 % 2.41 % 2.48 % 2.25 % Return on beginning equity 22.66 % 23.18 % 24.49 % 26.58 % 23.60 % Net interest margin (Fully-taxable equivalent) 4.39 % 4.58 % 4.77 % 4.75 % 4.37 % Noninterest expense to average assets 1.12 % 1.28 % 1.20 % 1.25 % 1.11 % Efficiency ratio 25.04 % 27.29 % 26.01 % 25.97 % 25.23 % Net charge-offs (recoveries) to average loans (annualized) 0.01 % -0.00 % 0.00 % 0.00 % -0.19 % Ratios as of period end: Tier 1 leverage capital ratio 10.46 % 10.61 % 10.63 % 10.30 % 9.95 % Common equity tier 1 risk-based capital ratio 11.63 % 11.51 % 11.30 % 10.81 % 10.46 % Tier 1 risk-based capital ratio 11.63 % 11.51 % 11.30 % 10.81 % 10.46 % Total risk-based capital ratio 15.32 % 15.14 % 14.91 % 14.39 % 14.09 % Allowances for credit losses to loans at end of period 1.46 % 1.40 % 1.36 % 1.35 % 1.33 % Allowance for credit losses to non-performing loans 3.86x 13.86x 254.56x 12.49x 10.75x Average balances: Total securities $ 368,968 $ 397,905 $ 442,852 $ 434,830 $ 410,649 Total loans 5,086,241 5,044,004 5,012,862 4,981,561 4,908,870 Total earning assets 6,597,557 6,432,950 6,276,630 6,193,330 6,076,616 Total assets 6,719,859 6,558,651 6,400,849 6,328,017 6,215,184 Total time certificate of deposits 2,680,854 2,617,872 2,209,370 1,872,239 1,749,257 Total interest bearing deposits 4,800,227 4,549,519 4,451,299 4,287,287 3,973,105 Total deposits 5,654,350 5,481,457 5,479,945 5,468,562 5,373,252 Total interest bearing liabilities 5,069,014 4,847,596 4,630,982 4,435,245 4,121,005 Total equity 678,020 677,306 650,963 613,729 598,188
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Nine Months Ended September 30, September 30, 2023 2022 Interest income $ 353,024 $ 196,003 Interest expense 133,046 22,757 Interest income before provision for credit losses 219,978 173,246 Provision for credit losses 6,500 5,350 Noninterest income 5,007 7,054 Noninterest expense 58,761 50,697 Income tax expense 45,523 34,968 Net income $ 114,201 $ 89,285 Earnings per share Basic $ 8.01 $ 6.09 Diluted $ 7.92 $ 6.00 Ratios for the period: Return on average assets 2.33 % 1.95 % Return on beginning equity 24.22 % 20.35 % Net interest margin (Fully-taxable equivalent) 4.58 % 3.86 % Noninterest expense to average assets 1.20 % 1.11 % Efficiency ratio 26.12 % 28.12 % Net charge-off (recoveries) to average loans 0.00 % -0.03 % Average balances: Total securities $ 402,971 $ 432,085 Total loans 5,047,971 4,686,424 Total earning assets 6,436,889 6,008,091 Total assets 6,560,955 6,131,640 Total time certificate of deposits 2,504,426 1,809,492 Total interest bearing deposits 4,602,039 3,967,963 Total deposits 5,539,223 5,297,387 Total interest bearing liabilities 4,851,214 4,115,805 Total equity 668,862 600,558
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) As of September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Unaudited quarterly statement of financial position data: Assets: Cash and cash equivalents $ 1,021,108 $ 1,049,745 $ 885,691 $ 767,526 $ 749,484 Securities held-to-maturity, at amortized cost 21,474 21,818 22,155 22,459 12,442 Securities available-for-sale, at fair value 335,608 352,548 367,492 428,295 377,534 Loans: Real estate – Mortgage: Real estate—Residential $ 663,021 $ 631,795 $ 612,907 $ 609,292 $ 587,812 Real estate—Commercial 2,688,148 2,744,074 2,813,681 2,730,726 2,693,852 Total Real Estate – Mortgage 3,351,169 3,375,879 3,426,588 3,340,018 3,281,664 Real estate – Construction: R/E Construction — Residential 226,482 186,239 175,286 193,027 179,955 R/E Construction — Commercial 164,666 153,418 142,319 204,478 188,083 Total real estate construction loans 391,148 339,657 317,605 397,505 368,038 Commercial and industrial 1,377,675 1,388,865 1,299,325 1,320,830 1,330,028 SBA 2,424 4,427 7,306 11,339 8,067 Trade finance 5,541 9,348 6,885 4,521 22,634 Consumer and others 285 345 19 580 115 Gross loans 5,128,242 5,118,511 5,057,728 5,074,793 5,010,546 Allowance for credit losses on loans (74,849 ) (71,429 ) (68,929 ) (68,472 ) (66,472 ) Net deferred loan fees (10,240 ) (10,464 ) (10,286 ) (9,939 ) (9,695 ) Net loans, excluding loans held for sale $ 5,043,153 $ 5,036,618 $ 4,978,513 $ 4,996,382 $ 4,934,379 Loans held for sale $ - $ 176 $ - $ - $ - Net loans $ 5,043,153 $ 5,036,794 $ 4,978,513 $ 4,996,382 $ 4,934,379 Other real estate owned and repossessed assets $ 16,716 $ 16,728 $ 18,628 $ 21,990 $ 26,075 Investment in affordable housing partnerships 54,679 56,844 59,009 61,173 62,745 Federal Home Loan Bank stock, at cost 15,000 15,000 15,000 15,000 15,000 Other assets 124,793 118,465 115,049 112,533 115,184 Total assets $ 6,632,530 $ 6,667,942 $ 6,461,537 $ 6,425,358 $ 6,292,843 Liabilities: Deposits: Demand $ 838,300 $ 870,282 $ 1,050,992 $ 1,192,091 $ 1,341,199 Interest bearing demand 2,091,384 2,005,298 1,751,439 2,295,212 2,263,775 Savings 30,427 32,089 33,861 39,527 38,151 Time certificates of $250,000 or more 1,283,461 1,244,128 1,329,720 1,138,727 971,378 Other time certificates 1,439,699 1,437,194 1,241,754 891,440 841,173 Total deposits $ 5,683,271 $ 5,588,991 $ 5,407,766 $ 5,556,997 $ 5,455,676 Acceptances outstanding $ 103 $ 448 $ 107 $ 1,731 $ 10,058 Advance from Federal Home Loan Bank - 150,000 150,000 - - Subordinated debt issuance, net 148,173 148,114 148,055 147,995 147,936 Commitments to fund investment in affordable housing partnerships 20,824 20,930 26,709 27,490 28,611 Other liabilities 109,651 90,692 72,359 60,074 60,009 Total liabilities $ 5,962,022 $ 5,999,175 $ 5,804,996 $ 5,794,287 $ 5,702,290 Equity: Net common stock, no par value $ 143,584 $ 167,404 $ 181,208 $ 184,604 $ 180,324 Retained earnings 566,027 535,373 505,207 475,072 443,409 Accumulated other comprehensive income (39,103 ) (34,010 ) (29,874 ) (28,605 ) (33,180 ) Total shareholders' equity $ 670,508 $ 668,767 $ 656,541 $ 631,071 $ 590,553 Total liabilities and shareholders' equity $ 6,632,530 $ 6,667,942 $ 6,461,537 $ 6,425,358 $ 6,292,843
PREFERRED BANK Quarter-to-Date Average Balances, Yield and Rates (Unaudited) Three months ended September 30, Three months ended June 30, Three months ended September 30, 2023 2023 2022 Interest Average Interest Average Interest Average Average Income or Yield/ Average Income or Yield/ Average Income or Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate ASSETS (Dollars in thousands) Interest earning assets: Loans (1,2) $ 5,086,302 $ 106,695 8.32 % $ 5,044,517 $ 102,220 8.13 % $ 4,908,870 $ 71,192 5.75 % Investment securities (3) 368,968 3,422 3.68 % 397,905 3,709 3.74 % 410,649 2,995 2.89 % Federal funds sold 20,111 278 5.48 % 20,000 272 5.45 % 20,071 117 2.30 % Other earning assets 1,122,176 15,235 5.39 % 970,528 12,311 5.09 % 737,026 4,221 2.27 % Total interest earning assets 6,597,557 125,630 7.55 % 6,432,950 118,512 7.39 % 6,076,616 78,525 5.13 % Deferred loan fees, net (10,071 ) (10,417 ) (9,333 ) Allowance for credit losses on loans (71,503 ) (68,956 ) (61,477 ) Noninterest earning assets: Cash and due from banks 12,101 12,712 10,562 Bank furniture and fixtures 8,814 9,005 9,615 Right of use assets 21,491 21,988 21,404 Other assets 161,470 161,369 167,797 Total assets $ 6,719,859 $ 6,558,651 $ 6,215,184 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Deposits: Interest bearing demand and savings $ 2,119,373 $ 20,324 3.80 % $ 1,931,647 $ 16,453 3.42 % $ 2,223,848 $ 6,455 1.15 % TCD $250K or more 1,251,397 14,085 4.47 % 1,259,305 12,772 4.07 % 914,373 2,517 1.09 % Other time certificates 1,429,457 15,284 4.24 % 1,358,567 12,664 3.74 % 834,884 1,333 0.63 % Total interest bearing deposits 4,800,227 49,693 4.11 % 4,549,519 41,889 3.69 % 3,973,105 10,305 1.03 % Advance from Fedferal home loan bank 120,652 1,557 5.12 % 150,000 1,888 5.05 % - - 0.00 % Subordinated debt, net 148,135 1,325 3.55 % 148,077 1,325 3.59 % 147,900 1,325 3.55 % Total interest bearing liabilities 5,069,014 52,575 4.11 % 4,847,596 45,102 3.73 % 4,121,005 11,630 1.12 % Noninterest bearing liabilities: Demand deposits 854,123 931,938 1,400,147 Lease Liability 19,759 20,708 21,332 Other liabilities 98,943 81,103 74,512 Total liabilities 6,041,839 5,881,345 5,616,996 Shareholders’ equity 678,020 677,306 598,188 Total liabilities and shareholders’ equity $ 6,719,859 $ 6,558,651 $ 6,215,184 Net interest income $ 73,055 $ 73,410 $ 66,895 Net interest spread 3.44 % 3.66 % 4.01 % Net interest margin 4.39 % 4.58 % 4.37 % Cost of Deposits: Noninterest bearing demand deposits $ 854,123 $ 931,938 $ 1,400,147 Interest bearing deposits 4,800,227 49,693 4.11 % 4,549,519 41,889 3.69 % 3,973,105 10,305 1.03 % Total Deposits $ 5,654,350 $ 49,693 3.49 % $ 5,481,457 $ 41,889 3.07 % $ 5,373,252 $ 10,305 0.76 % (1) Includes non-accrual loans and loans held for sale (2) Net loan fee income of 1.1 million, $$912,000 and $1.2 million for the quarter ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively, are included in the yield computations (3) Yields on securities have been adjusted to a tax-equivalent basis
PREFERRED BANK Year-to-Date Average Balances, Yield and Rates (Unaudited) Nine months ended September 30, 2023 2022 Interest Average Interest Average Average Income or Yield/ Average Income or Yield/ Balance Expense Rate Balance Expense Rate ASSETS (Dollars in thousands) Interest earning assets: Loans (1,2) $ 5,048,452 $ 304,796 8.07 % $ 4,686,424 $ 181,852 5.19 % Investment securities (3) 402,971 11,125 3.69 % 432,085 7,590 2.35 % Federal funds sold 20,111 774 5.14 % 20,093 182 1.21 % Other earning assets 965,355 36,633 5.07 % 869,489 6,698 0.25 % Total interest earning assets 6,436,889 353,328 7.34 % 6,008,091 196,323 4.37 % Deferred loan fees, net (10,142 ) (8,257 ) Allowance for credit losses on loans (69,653 ) (60,004 ) Noninterest earning assets: Cash and due from banks 11,912 11,167 Bank furniture and fixtures 8,931 10,024 Right of use assets 21,780 21,480 Other assets 161,238 149,139 Total assets $ 6,560,955 $ 6,131,640 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Deposits: Interest bearing demand/ savings $ 2,097,613 $ 53,854 3.43 % $ 2,158,471 $ 10,373 0.64 % TCD $250K or more 1,258,870 37,600 3.99 % 911,931 4,755 0.70 % Other time certificates 1,245,556 33,798 3.63 % 897,561 3,654 0.54 % Total interest bearing deposits 4,602,039 125,252 3.64 % 3,967,963 18,782 0.63 % Advance from Fedferal home loan bank 101,099 3,819 5.05 % - - 0.00 % Subordinated debt, net 148,076 3,975 3.59 % 147,842 3,975 3.59 % Total interest bearing liabilities 4,851,214 133,046 3.67 % 4,115,805 22,757 0.74 % Noninterest bearing liabilities: Demand deposits 937,184 1,329,424 Lease Liability 20,482 21,795 Other liabilities 83,213 64,058 Total liabilities 5,892,093 5,531,082 Shareholders’ equity 668,862 600,558 Total liabilities and shareholders’ equity $ 6,560,955 $ 6,131,640 Net interest income $ 220,282 $ 173,566 Net interest spread 3.67 % 3.63 % Net interest margin 4.58 % 3.86 % Cost of Deposits: Noninterest bearing demand deposits $ 937,184 $ 1,329,424 Interest bearing deposits 4,602,039 125,252 3.64 % 3,967,963 18,782 0.63 % Total Deposits $ 5,539,223 $ 125,252 3.02 % $ 5,297,387 $ 18,782 0.47 % (1) Includes non-accrual loans and loans held for sale (2) Net loan fee income of $3.2 million and $2.9 million for the six months ended September 30 2023 and 2022, respectively, are included in the yield computations (3) Yields on securities have been adjusted to a tax-equivalent basis
Preferred Bank Loan and Credit Quality Information Allowance For Credit Losses History Nine Months Ended Year ended September 30, 2023 December 31, 2022 (Dollars in 000's) Allowance For Credit Losses Balance at Beginning of Period $ 68,472 $ 59,969 Charge-Offs Commercial & Industrial 124 1,222 Mini-perm Real Estate - 1 Total Charge-Offs 124 1,223 Recoveries Commercial & Industrial 1 - Mini-perm Real Estate - 2,376 Total Recoveries 1 2,376 Net Charge-Offs (recoveries) 123 (1,153 ) Provision for Credit Losses: 6,500 7,350 Balance at End of Period $ 74,849 $ 68,472 Average Loans Held for Investment $ 5,047,971 $ 4,760,815 Loans Held for Investment at End of Period $ 5,128,242 $ 5,074,793 Net Charge-Offs (recoveries) to Average Loans 0.00 % -0.02 % Allowances for Credit Losses to Loans at End of Period 1.46 % 1.35 % AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188AT FINANCIAL PROFILES:
Jeffrey Haas
General Information
(310) 622-8240
PFBC@finprofiles.com
